Ripple CTO Criticizes SEC, Highlights Regulatory Gaps in Crypto

Ripple’s chief technology officer (CTO), David Schwartz, recently criticized the United States Securities and Exchange Commission (SEC) regulatory approach. He shared an excerpt highlighting how the agency’s lack of clarity prevents adequate notice and violates due process requirements.

Ripple CTO’s comment follows Coinbase’s Chief Legal Officer (CLO) Paul Grewal’s post on X highlighting the court’s decision on a writ of mandamus the crypto exchange filed at the Third Circuit.

For context, the SEC and Coinbase have been embroiled in a legal case since 2023 after the regulator sued the crypto exchange, alleging that it violated federal securities law by operating as an unregistered broker, exchange, and clearing agency since 2019.

Ripple CTO Highlights SEC’S Regulatory Gaps

In the recent post, Grewal rebuked the SEC for its approach to crypto regulations, highlighting that the court ruled that the agency’s order was “conclusory and insufficiently reasoned, making it arbitrary and capricious.” Therefore, the court has partly granted Coinbase’s petition and remanded it to the SEC for a more complete explanation. 

The Ripple CTO expressed his displeasure with the SEC’s regulatory approach, sharing a text criticizing the agency for applying broad rules to a diverse crypto industry. According to Schwartz, the commission has offered no meaningful guidance on which crypto assets it views as security.

The agency has concentrated on cryptocurrencies that resemble traditional stocks, ignoring the unique characteristics of stablecoins, utility tokens, and other assets such as Bitcoin and Ethereum.

Furthermore, Schwartz stated that the lack of clarity leaves issuers and exchanges operating without assurance that their activities will not be subject to future SEC action.

Expected Changes in SEC Leadership

The SEC’s regulatory approach, led by Gary Gensler, has been criticized numerous times by prominent crypto industry leaders for its hostile stance and crackdown on crypto firms. 

Schwartz, in particular, has been vocal about his dissatisfaction with the SEC’s attempts to implement crypto regulations.

As the day approaches for U.S. President-elect Donald Trump to take office, analysts expect the incoming administration to prioritize crypto regulations, which aligns with his campaign promise to address industry challenges.

Notably, Trump has already nominated Paul Atkins, a pro-crypto libertarian, to replace Gary Gensler as the US SEC chairman, raising hopes of clearer and more favorable crypto regulations in the U.S.